accounting essay

Study on Is Accounting Profession under Threat

Published: 23, March 2015

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Recent events in global financial world that is dissolution of companies due to continuous losses has made people to question the efficiency and honesty of the professional accountants in discharging their duties for the interest of public and society. These events have forced global financial scholars and experts to think about the future scope of this profession.

this article mainly focus on challenges to accounting profession in the context of strategic management accounting in connections with business firm's expectations and the expectations of stakeholders and communities which ensure that the accountants will function for the benefits of society and public. The expectations of employers of accounting graduates is higher when we compare with the present academic system which indicates that the present academic courses should be upgraded as the business firms are expecting only real professionals who can be able to work any type of business environment and they should be flexible to the future changes in business environment. Their ultimate responsibility is to make the business firm trust worthy in the eyes of customers and other stakeholders and society. Today the demand from business firms' for accounting professional with sophisticated modern accounting skills is caused revolutionary changes in the accounting and financial management graduation courses importance of discipline knowledge.

The internal and global challenges on the professions related to financial management may be involve win the confidence of public and stakeholders of the business and operating markets, improving the performance of professional accountants and auditors, understanding the increased role of external auditors, preventing the corruption the system of public audit, and making the financial statements and reports trust worthy in the eyes of concerned parties. Today's business environment is very sensitive to the changes in its components such as technology or markets the accounting professionals to work hard with efficiency and honesty to meet these challenges effectively.

Introduction

In today's business environment are professional accountants directly responsible to their customers, companies and to the society and also they should know possible legal obligations to the stakeholders. Accounting profession is not only limited to preparing accounting statements but also involves in wide variety of functions which provides inputs to the managerial decision making. If an accounting professional is not able to perform his duty and responsibilities in satisfied level according to the universal standards it is the major liability in the hands of an accountant. Compared to other type of professions this profession has its own code of ethics hence it is dignified and respective profession which provides practical inputs for the effective decision making.

Advanced Strategic Management Accounting

During the past two decades, many organizations in business and finance sectors have to face changes in their business environment. Economic reform polices by the developing countries, policies, competition from multinational companies in local markets has resulted in a typical situation, where most companies are now competing in a highly competitive global market. In addition there has been a significant reduction in product life cycle arising from rapid changes in technological innovations and the need to meet sophisticated customer demands. To compete successfully in global environment, companies have to work towards to satisfy made customer demands. They have forced to adopt new Management strategies, changed their business systems and invested in new technologies. The increasing competition has affected their profits and more attention is required to be paid to the various aspects of Management accounting aspects. These changes have had a significant influence on strategic Management accounting systems. Role of professional accountant has no longer remained that of an accountant, but he has assumed a significant role in improving the competitiveness of firms.

5Strategic Management Accounting is the branch of management accounting which mainly focus the uncontrollable factors which a business firm should more concentrate, and these factors may be financially or non financially but related to the financial and business decisions of the firm.

According to the Ken Simmonds, the formulation of business strategy of the firm mainly depends on the financial information of the firm and the competing firms. This information may involve details of Production costs, product price, production volume, Market size, availability of cash resources and other resources such as raw materials which should be emphasized.

But Professor Bromwichn compared the past practices in management accounting which have modified with new directions including the active role of professional accountants in business decision makings. These directions may be towards the inclusive of financial information into strategy for cost analysis that is the basic for all future business decisions. Other directions towards having updated information bank related to the strategies of competitors especially their costing methods, cost structures and costing decisions.

The limitation of traditional management accounting in the areas analysis of cost and cost related activities is significant which gives birth to the development of modern strategic management accounting system. Traditional management accounting system has no particular techniques to ascertain the costing methods and situation of competitors but decisions are based on only the information from financial statements. Modern strategic management accounting has its own techniques to ascertain cost position. It also helps business firms to how to achieve cost advantages current as well as future years. In this context the role of Accounting professional is very important for the survival of business firm compared to every angle of the present business environment.

Accounting profession

In the context of professional accounting, the power and responsibility of an accountant can be justified when financial statements provides expected information according to the objectives functions especially protection of public and social interest. Under flexible business environment Accountants are vested with enough power in order to perform their functions without any interruption for the healthy future of business firm.. According to the scholars the up gradation of accounting skill is a specific task as the accounting profession also one of the component of employment structure which is influenced by policies of government and economic policies.

. There is a argument the accounting skills and knowledge should be revised and updated time to time because these skills and knowledge should be according to the changing expectations of the society and the stakeholders of the business firm. But as a professional an accountant should utilize these skills and knowledge in optimum level for the interest of the employer as well as interested parties. . The accounting profession has gained enough importance especially it is the sole body which has the ultimate authority on the financial related issues and matters. The one of the primary objectives is to work for the benefit of social interests that has analyzed for making the accounting progression as an appropriate occupation in modern employment world. And According to some experts.. Accountants with traditional views are no longer sustaining in the present environment. According to the research the Today's accounting and auditing methods are in modified forms compared to traditional methods of accounting.

Changing role of Accountant

Today's accountants should mostly focus on knowledge, skills and ability to manage these as a particular service. This requirement in business environment has created business and ethical issues for the accountants/ auditors and their customers. This includes problem-solving and customer advice features of the skilled professional. Changes also include the over emphasis on specific training for developing practical skills as part preparing of new graduates to the practical business world. The introduction of these practical training in academic degrees involves uncertainty and time frame because the academic institutions should ready for accepting the current changes. Company's especially multinational companies mainly concentrate on these practical skills but facing problems of assessment for right candidates with practical knowledge.

Challenges to Accounting Profession

Due to the influence of globalization changes in financial strategies have been affecting almost every business and services around the world. Especially Accounting and finance sector is directly affected, financial experts world wide are working for the improvements of the accounting system. Several seminars are going on in this regard; financial professionals, scholars have to share their ideas and views on the present challenges in finance and accounting today, and acquire sophisticated skills in order to face globalization effect. Today global recession and financial conflicts has developed new trend of threats and challenges. According to the experts of International Accounting Standards Board, the global financial conflict is the main which emphasized transference in financial reporting and flexible accounting standard with definite principle to face the new trend in future. The context and dynamics of modern strategic management accounting the changes in the accounting skills have forced to adopt by professional accountants who are cautious to provide value added service for their customers. Globalization process has made the business activities to cross the boundaries of nations. The global financial and business environment has put pressure on professional accountants and auditors as they are the important information providers for the business success.

Every company seeks opportunities in global market for the expansion of the business. But uncertainty in market conditions and rapid innovations in technology have made themselves to face any type of business situation for the interest of all their stakeholders where their business strategies, their market share and capital adjustments also subject to changes along with the marginal profit.

Internal challenges

The first challenge to professional accountant is the measurement of financial performance. Revenue is a single measurable indicator of financial performance. The common feeling is that over-emphasis on revenues, unscientific ways of their analysis and interpretations financial information. But this information is the basis for long term business decisions.

Secondly issues regarding historical accounting information and statements. Some times there is feeling that a balance sheet prepared imperfect way and it does not reveal accrued profits based on future changes in market condition. This is the major draw back in disclosing true financial information of the company.

Thirdly financial statements do not measure the assets and liabilities on the basis of today's accounting standard. Hence investors may be misled in making investment decisions, which will put them at greater investment risk. They also need the information regarding the value goodwill and other intangibles and capital structure.

Lastly the financial and accounting statements show only historical transactions and facts and they don't concentrate much on the future events and transactions. They put limited attention on the hard profits and also limited attention to the required process for maximization of wealth.

Challenges of Globalization

Innovations in technology are the greatest affect on the profession and present system failure to coop with this challenge may be resulted in the devaluation of the importance of the profession. The introduction of the information technology has greatly influence the system in which companies do business, structure their organization and operate their reporting systems and each of these are the considerable challenges for the accounting profession.

E- Business has introduced new business risks along with the great advantages which a professional accountant should take into account. The unauthorized access company information; increased volume of business as created credit risks; and the proper allocation of income and expenses,

Accounting firms and professionals should be concentrate on with these risks. The changes in Government financial police and company the annual financial statements and other communications can be communicated to the concerned parties through the electronic media or through web sites.

Out of dated information will not reveal clear picture and hence share price of the company affected. Market expects the clear picture of financial and business performance and there are pressures on firm's o provide such information when required.

Lastly the centralization of accounting system and accounting information systems will be the top management based decision where accounting is considered as secondary issue. Branch accounting is in declining trend today information will be directly flow to the head office of the firms.

Globalization can be defined as the existence of a situation where there is an easy access to any part of the world. It is in the form of information on any subject matter. A professional accountant should face several challenges with this situation; businesses expand sometimes beyond country borders in response to globalization. In market led globalization model an accounting professionals should play a dominant role. To make the Global markets to function properly, the accounting profession must adapt and modernize in response to the globalization of finance and investment. In corporate-led model of globalization the accounting profession does not merely adapt to forces of globalization. But accounting industry has played and continues to play an active role in the structuring global markets for accounting services. Due to the globalization there are some threats to accountants and the accounting profession as a whole

Accountants working for foreign-owned companies, their knowledge, skills, and abilities may be restrict them to performing only low-value, compliance-oriented work. Accounting professionals can be also benefited from the effects of globalization. These are Accountants who are ready to expand their financial accounting knowledge, skills, and abilities they can become expertise in understanding of changing business requirements. Accountants with their theoretical knowledge, skills, and abilities with the performance oriented knowledge, skills, and abilities of management accounting can be achieve high level of experience in this context.

Today businesses become increasingly globalize, 10there is clearly more pressure on accountants to increase the knowledge, skill, and abilities beyond their present limit of functioning in order to fit well into the globalization of the 21st century. In this context the accounting profession has an important role in assisting firms to face competitive finance and business environment

Implications of Academicians

The role of the accountant in past was just recording the facts and figures but the role of the professional accountant has been criticized by many scholars and analysts over the decades, especially the accounting skills developed by students of accounting management schools This demand primarily developed in Academic level, the. The need for this change is based on a number of draw backs identified in the skills taught in graduation schools that students when bring to the practical world. Another criticism is these 1skills cannot be efficiently being taught in schools where the employment is dominated by specialized technical skills. Requisite skills required by future professional accountants and auditors will include easy learnable professional skills along with ethics.

These specific skills are necessary for modern business environment because it helps business entities to 1solve the diversity of business challenges. This is the main challenge for the academic institutions to balance between accounting graduate skills which are theoretical in nature and skills sought by modern business entities. There is gap between the actual school syllabus and the knowledge expected by companies. The academic institutions should try to train accounting graduates to suit the interest and expectations o the employers. The accounting1graduates with sophisticated skills are in an environment that requires accountants to show high level of technical performance to meet the demands of financial and business entities. Number of comments and opinions from global academicians and practitioners has forced the Government authorities and International Regulatory Bodies related to accounting issues to make revolutionary changes in the accounting standards, methods and techniques which are relevant to future years. Majority Charted accountants and Accounting professionals feels present accounting system is not according to the requirements of modern business and it is less flexible to the changing environment. These academicians and practitioners agree that if accounting is to serve a useful role in the changing environment, academic education in accounting and scope of research should become broader, dynamic and not limited by a single approach. Despite these matters, the academicians and practitioners feel that present academic programmes in Accounting and finance area should be reviewed according to the demand from job market. Professional Ethics The corporate financial conflicts has given good inputs to finance professionals and for the monitoring of accounting system.

Continuous effort from academicians and financial experts in developed countries there are strategic changes in academic education and training programmes, professional accountants should be able to develop the specific skills they need to successfully compete in the employment market for new types of information and financial services. This vision is used by many of the profession's leaders. As per the study in U.S.A there are considerable increase in the number of professional accountants and AICPA membership during the period from 1970 to 1994. This indicates that in developed courtiers are ready to face the challenges.

Study in U.S.A

(Courtesy: Annual report AICPA)

Table 1

Total Accounting Employment

Year

Numbers in Thousands

1970

646

1980

1013

1990

1446

1994

1483

Table 2

Membership in AICPA

Year

Numbers in Thousands

1970

74

1980

161

1990

296

1994

319

Impact of Challenges on Strategic Management Accounting

During the past two decades, many organizations in business and finance sectors have to face changes in their business environment. Economic reform polices by the developing countries, business policies and competition from multinational companies in local markets has resulted in a typical situation, where most companies have to face severe competition from rival business firms in a highly competitive situation. In addition there has been a change observed in business life cycle due to rapid changes in technological innovations and the need to meet sophisticated customer demands because production of each product is considered as a independent business. To compete successfully in global environment, companies have to work towards to satisfy made customer demands. They have forced to adopt new Management and financial strategies, changed their accounting systems and investment in new technologies. The increasing competition has affected their profits and more attention is required to be paid to the various aspects of strategic Management accounting aspects. These global challenges have had a significant influence on strategic Management accounting systems. Role of professional accountant has no longer remained that of an accountant, but he has assumed a significant role in improving the competitiveness of firms.

Professional Ethics

The financial crisis has given good inputs to finance professionals and for the monitoring of accounting system. Today accounting professionals in the business sector should not only concentrate on earning of revenue, but also take into account the public and external parties related to the business. The present accounting system should be able to create ethical environment for the benefit of society in generally and stakeholders particularly.

Directions for Ethical Performance

The directions towards performing the duty in ethical way Global Charted Accountants Associations encourage accountants and Auditors to conduct them effectively and to do quality internal and external auditing in appropriate manner and other accounting functions. Professional Institutes should develop high level auditing standards and ethics their applications in practical world. There are so many ethical obligations which make auditors in right path of accounting standards and legal obligations.

Figure 1.

Ethical codes

Geographical study requirements

Quality control

Legal registration

Professional programs, training and examinations

Continuing education requirements

Legal liability

Accounting standards

Conduct of professional Accounting firm personnel

Future of the Accounting Profession:

Introduction of specific knowledge and the increased expectations from global business world today accounting profession is a specialized profession, which is resulted in great the movement toward up gradation of accounting graduate or professional education. Advanced programmes in computer technology and its role in updating the information for concerned parties of the business, financial experts are expecting t the new trend in information technology and communications which will reshape the accounting employment structure.

Computers are today important part of the accounting information system. Introduction of new computer software programmes has given considerable contribution for the modification of business and accounting from the last decade and will continue to the future also. These days we can observe that the new accounting software's decrease the work load of accounting firms which is resulted in the decrease of employing fresh candidates for accounting work. But developments in accounting profession have shown steady growth from last 20 years despite the increased use of computer information systems to perform routine accounting tasks.

Suggestions and Recommendations

accounting profession have an significant role in assisting the management for business decisions to not only contribute for strengthening the financial position but also should be modified to analyze management risk factors as the parallel profession to management graduation, for firm's operational and strategic decisions .

These personnel should also be able to anticipate and manage risks factors arising from bulk volume of financial transactions which made the firms vulnerable to uncertainty and unexpected price variations.

As the scope for this profession increased, it will find itself facing increasingly conflicting pressures arising from convergence. It should be designed to establish proper balance manage internal financial conflicts and external conflicts related to firm's financial matter and should be able to these commercial interests to introduce the ability to act as a trusted and independent professional business consultant and advisor.

The accounting profession should extend its role and responsibility for promoting good corporate business environment. It should also be concerned for sustaining of good corporate governance is not only fulfilling legal obligations but also should be based on values and ethics.

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